Understanding Deductibles

Answers to some commonly asked questions

Why choose a higher deductible?

You can reduce premiums by 20% to 35%.

Buying protection that covers you for a $50 or $100 claim is generally not a good buy. You buy insurance to protect yourself from significant losses.

A higher deductible lessens the chance that your eligibility with your insurance company will be affected. If you have a low deductible that causes you to submit a number of small claims, your premiums will likely increase or your coverage could be terminated.

If you have more questions about whether you should choose a higher deductible, call one of our member service consultants at 1-800-279-4010.

Where does a deductible fit in?

Auto insuranceThe deductible applies to the protection you buy for damage to your vehicle. These coverages are called collision and comprehensive. Some companies refer to comprehensive coverage as “other than collision.” Collision coverage reimburses you for vehicle damage caused by colliding with another vehicle or object. Comprehensive coverage reimburses you for vehicle damage caused by circumstances other than a collision, such as vandalism, hail, or fire. It also includes coverage for damages like a cracked windshield or hitting an animal.

Home insurance and renters insuranceThe deductible applies when your property is damaged, whether it be your home or personal belongings. The one exception is high-valued items that are specifically insured for an additional premium or scheduled on the policy.

When you schedule property, such as jewelry, furs, silver, or collectibles, you receive additional coverage up to the amount you specify. If one of these scheduled items is damaged or stolen, you will not have to pay a deductible.

Let’s say that a fire in your home causes $10,000 worth of damage. You will be reimbursed $10,000 less your deductible. If your diamond ring is stolen and you scheduled the ring for $3,000 of coverage, your policy will reimburse you up to $3,000 and no deductible applies.

How much can I afford?

Evaluating your ability to pay the deductible is an important consideration. Even if you believe that paying a higher deductible to reduce your premium is a sound theory, a $1,000 deductible makes little sense if making this payment creates significant hardship.

What is best for me?

Buying insurance protection is very personal. You must think about what to protect, how much protection to buy, and the deductible amount that makes sense for you. Assessing your risk tolerance is critical to making these decisions. Are you more comfortable with a lower deductible, which means you will pay a higher premium but less out of your pocket if you have an accident? Or, are you confident you will have the ability to pay a higher deductible if you have a claim and would prefer lower premiums?

What we recommend

Auto insuranceFor most people, we recommend a $500 collision deductible and a $250 comprehensive deductible for your auto insurance.

We recommend different deductibles because the circumstances surrounding a collision are more controllable. You (and your insurance company) only pay for the damages if you are responsible for the accident or if the person who is responsible cannot be identified (hit and run accident). If you are involved in a collision caused by another driver, the other driver is responsible for the damages and his or her insurance should pay.

Comprehensive claims are a little bit different. You have less control over damage to your vehicle caused by theft, vandalism, hail, or fire. In these situations, a lower deductible for comprehensive makes more sense.

Home insurance and renters insuranceFor home insurance and condo insurance we recommend a $1,000 deductible. For renters insurance we recommend a $250 deductible. Based on your risk tolerance and other individual circumstances, you may want to increase these amounts.

Protect yourself

An insurance policy for your auto, home, or personal belongings is one way to protect yourself from a catastrophic financial loss. It is a contract between you and the insurance company to share the cost if something happens to your auto or home. You share in the financial burden in two ways: by paying a deductible and by paying any amount that exceeds your coverage limits.

What is a deductible?

A deductible is the amount you pay out of your own pocket before the insurance policy begins to pay. Deductibles apply only when your property is damaged (vehicle, home, and personal belongings). No deductible applies when your policy pays for a covered liability loss such as a claim for a slip-and-fall on your sidewalk or a dog bite.

How does a deductible affect my premium?

Auto and home insurance premiums vary depending on the amount of deductible you choose to pay. Selecting a higher deductible will decrease premiums and selecting a lower deductible will increase premiums.

Effective April 2017.Policies and programs described are subject to change at any time.

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